Chinese state bank chief warns against buying property now ‘because there’s no money to be made’
23 December, 2018 China Construction Bank chairman suggests market may not rise much further and warns that investors may become ‘trapped’
https://www.scmp.com/economy/china-economy/article/2179289/chinese-state-bank-chief-warns-against-buying-property-now
The chairman of a leading Chinese state bank on
Sunday warned Chinese investors not to buy property now because “there’s
no money to be made” due to high prices and alarming vacancy rates.
Tian Guoli, 田國立 the chairman of China Construction
Bank, which provides mortgage loans to millions of Chinese households,
said that the room for further property price rises was limited and it
was unwise to buy at current rates, according to the portal Sina.com.
“There’s no money to be made if you buy a flat
nowadays. If you insist on buying a home, aren’t you trapped at the high
price level?” Tian told a forum organised by Peking University’s
Guanghua school of management.
The warning by Tian, who is an alternate member
of the Communist Party Central Committee, came at a time when the
country is in heated debate about the role of the property market –
whether it will lead to an bust or whether it can help shore up the
economy.
At the recently concluded Central Economic Work
Conference, the top leadership promised to build a long-term mechanism
for the property market, on the basis that “property is for living, not
for speculation”, adding that regulations would vary from city to city.
Over the past two decades property has proved to be one of the best investments in China.
Despite constant government intervention – from
purchase restrictions and sales limits to mortgage loan constraints –
the average price has soared, making property in Beijing and Shanghai as
expensive as London or Tokyo.
However, there has also been increasing concern
that a downturn in the housing market would hit households, banks and
developers hard – and this in turn would be a serious threat to China’s
state banks and local governments, whose revenues are tied to the
property market.
China will support manufacturing, private firms – economic agency
The value of outstanding real estate loans –
including mortgage and development lending – reached 38 trillion yuan
(US$5.5 trillion) by the end of September 2018, or 28 per cent of total
lending, according to government data.
The combined value of properties in China, Tian
warned, has reached US$40 trillion, larger than the US$30 trillion in
the United States.
While many property speculators in the West
prefer to rent out their properties to ensure a rental income, in China
it is more common to keep newbuilds empty because lived-in properties
lose some of their value.
While there are no official figures on the
number of vacant homes it is believed to be much higher than the 10 per
cent recorded in the US at the time of the subprime crisis.
Tian said China still an adequate supply of housing stock, with shortages limited to a few big cities.
However, in these cases he said it was important to ensure there were enough rental properties available.
“It is very necessary for large state-owned financial institutions to penetrate into property rental markets,” he said.
China’s economy ‘set to reach US$13.7 trillion by end of the year’
The latest China household finance survey
conducted by the Southwest University of Finance and Economics, which
was published last week, found that the number of vacant urban homes in
China has risen to 65 million units in 2017 from 42 million units in
2011, with the vacancy ratio rising to 21.4 per cent from 18.4 per cent
in the period.
China’s small cities had more serious vacancy problems than bigger ones, the research centre found, echoing Tian’s speech.
Data from the National Bureau of Statistics
showed that the average living area of Chinese urban residents already
reached 36.6 square meters in 2016.
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